5 Things Every CFO Must Know About Long-Term IT Investments

Today's executive management is fighting on several fronts: On the one side is the ever-increasing and looming cloud of Digital Disruption that is threatening well-established players even in the last niches. And on the other side, companies are scrambling to become customer-centric organizations to satisfy the high expectations of increasingly educated and empowered IT consumers.

The Changing Roles & Responsibilities Of Today's CFO

This, of course, has consequences on the roles and responsibilities of the executive management team, especially the Chief Financial Officer (CFO). Their job responsibilities have diversified, resulting often in many non-finance departments now reporting to this executive. According to McKinsey, CFOs aren't just the head of finance anymore. For some, the job has grown to include managing the company’s risk, regulatory compliance, M&A transactions and human resources.

In addition, up to 38% of CFOs are also responsible for IT (as in the ongoing IT management), which might be surprising at first, but it makes sense. But that is not all. An increasing number of enterprises also task their CFO with cybersecurity (18%) and digitization (14%) technology. In other words, the job of driving Business Transformation which, according to Forrester, are the "systems and processes to win, serve, and retain customers", falls under the charge of the Chief Financial Officer. For those IT literate CFOs, this means a huge responsibility to both control costs and initiate IT investment for productivity gains - a juggling act that many have struggled with in the past.

New CFO Mindset: Incremental Improvement Over Big-Bang Projects

With this new responsibility, as well as the internal and external pressures of becoming more efficient, agile, and innovative, executives must not only acquire new skills and push their horizons further, but they also need to change their mindset and drive a corporate culture of increased levels of change across the entire organziation.

Whilst many initiatives such as data center migrations still focus on a big bang, budgets and project-led delivery, the end user space is changing before our eyes. Now, instead of managing big bang projects (such as hardware refreshes, application deployments or migrating to the latest Windows Operating System every three to four years), Microsoft is driving proactive, iterative improvement cycles with an accelerated cadence. In the case of Windows feature updates, every 18 months or faster.

This means that Enterprise IT must become more fluid in service delivery. For example:

• Committing to ongoing managed replacement of desktops and laptops, or maybe even outsourcing the device lifecycle completely. 
• Windows 10 is now a Software-as-a-Service which means organizations have to move to the next version every 14-16 months or risk security breach.
• Moving towards cloud based email and collaboration solutions by switching to Office 365.

These are just some of the stepping stones towards ongoing IT Transformation Management as a service, often also referred to as Evergreen IT. Whilst the enterprise is on a steady path towards this new paradigm of operation, the consumer space is getting there faster than anyone thought possible. Just think about how often your mobile applications get updated, and how often your home Windows 10 machine is upgrading!

Becoming Agile: Managing IT In "Business As Usual" Mode

To manage Evergreen IT successfully. executives must gain a thorough understanding of the resources, processes and tooling required to strive for repeatability and efficiency. More times than not, you will ask yourself, "Does it make sense to make this a one-off project, or can I implement this in a repeatable and iterative fashion?" 

In terms of IT budgets, this means:

• The concept of IT investment budgets needs to be overhauled. More dollars will be attributed to "Business As Usual" rather than massive one-time efforts, because we are expecting those teams to manage proactive change, not just reactive events.
• Budget should be divided into activities that allow your company to keep the lights on (such as general maintenance, management and support) and activities that facilitate Business Transformation (e.g., digitalization, cybersecurity) with at least 25% of your budget dedicated to the latter.
• This change needs to be reflected in financial management and approval processes across the organizations. 

In addition to the financial implications, a move towards agile end user management will also result in a higher degree of business interruption. More change, more testing, more disruption.

Managing Business Disruption

But things are not only changing for the finance side. A faster cadence of IT updates also means increased business disruption that must be managed. While end users will be affected also, the biggest impact of the Windows 10 servicing plans and O365 enforced upgrades will be felt by the application owners and testers. 

Now, the CFO has to get buy-in from all involved application owners and testers every 18 months instead of every 3-4 years. Since ongoing change will result in a far greater overhead (and cost), this must be considered as well. 

When Is It Too Much?

In theory, Evergreen IT is easier to scope and yield exponential return on the investments made. So, you will want to do as much of it as possible, right? It is very easy to get wrapped up in the new and exciting aspects of this, but the workload and the amount of change your organization can absorb must be discussed beforehand and monitored carefully.

It is better to scale back when you have crossed the threshold of what level of user engagement is acceptable, than to push on. To avoid "burning out", discuss upfront in yearly planning meetings how many projects you can handle per year in terms of resources, but also without risking the loss of buy-in from your business and other stakeholders.

Also decide whether your current teams are capable of shifting to a new operating model. You cannot expect resources that have spent their lives reactively putting out fires to suddenly become proactive mini-project managers.

Managing Data Requirements

Last but not least, CFOs must have the right tooling in place to make educated decisions on what is in scope for each change, and therefore, what expenditure might be required — for example, to assess the security risks or determine when to move to the next version of the selected Windows 10 Branch based on hardware and application compatibility. To be able to accomplish this, you have to have an accurate picture of what you are dealing with and what the consequences and the resulting costs of your decisions are. In other words, you need to know what tools you need to invest in — tools like Juriba Analysis+ for a software catalog to enable your IT team to gain better insight into their IT estate, or Juriba's Dashworks solution to manage their IT transformation tasks. 

Conclusion

The role of the CFO is changing and it will, in the future, increasingly involve making strategic, technology-related decisions in addition to managing other business critical areas. To do so successfully, CFOs must not only keep abreast of innovative technological concepts and understand them on a high-level, but they also need to ensure that business disruptions are kept to a minimum, data requirements are well managed and change frequency and workloads are within the capacity of the organization.

But maybe most importantly, they need to spearhead an organizational shift in thinking about IT budgets, processes, resources and tooling as your company is moving away from big-bang IT projects to Evergreen IT.